In what would have been an unthinkable move just five years ago, it appears that the world’s second-largest miner Rio Tinto will no longer mine coal moving into the future.
Rio Tinto has been moving away from coal recently to focus on what it believes are better assets. The decision has largely been based on a belief inside Rio that coal will not be able to compete with other assets, especially in the future. Rio Tinto’s Chief Executive Jean-Sebastian Jacques has argued that even at Rio there is a limit to the amount of managerial and financial resources available, therefore, they would prefer to put these resources behind assets they believe will be stronger in the coming decades.
Helen Wildsmith of CCLA Investment Management who advise BHP and Rio spoke about the impact carbon emission tariffs (and other climate policies) have had on the decision to diversify away from coal;
“The big diversified miners are all trying to work out which commodities are going to be most disadvantaged in the future, and the low-carbon transition is one of the big uncertainties that they and other companies are facing,”
“We’re seeing more companies integrating their thinking on climate change scenarios into the macro-economic and cyclical scenarios that they work with.”
Rio Tinto’s efforts mean they have been steadily selling coal mines over the past few years. The sales of their coal assets have been for prices Rio believes are strong, allowing them to provide solid short-term returns for their shareholders.
This shedding of assets has been pounced upon by mining rivals who do not share Rio’s beliefs about the future of coal. Glencore this year has grown its coal portfolio after the acquired a $1.1 billion (plus royalties) stake in coal assets sold by Rio.